Indiana utilities fall back on climate goals amid AI data center boom

All of Indiana’s major electric utilities have halted or reversed plans to transition to clean energy, according to a Sept. 22 press release by the Sierra Club. 

IU’s 2023 Climate Action Plan, which mapped out steps for IU to reach carbon neutrality by 2040, predicted grid decarbonization by utility companies would account for 44.7% of IU's total decarbonization. The university did not immediately respond to a request for comment. 

This year’s “The Dirty Truth Report” from the Sierra Club, a national environmental advocacy group, found Duke Indiana and CenterPoint Energy both cut plans for clean energy and pushed back retiring coal energy, while the Northern Indiana Public Service Company and Applied Energy Services Indiana moved to build new gas plants.  

Utilities across the country earned an average score of 15 out of 100 on their plans to retire coal, transition to clean energy and stop building new gas power plants.  

Meanwhile, energy prices have surged this year, and a July report by Indiana activist group Citizens Action Coalition found for residential customers, Indiana’s energy prices had seen the biggest increase in two decades. 

Ben Inskeep, program director of Citizens Action Coalition, said the growth of artificial intelligence data centers means Indiana’s energy demand is “going up very rapidly.”  

A state law passed in 2019 incentivizes developers to build data centers in Indiana by offering tax exemptions on equipment and energy purchases. Qualifying centers can receive exemptions for up to 25 years for projects costing $750 million or less, and up to 50 years for projects exceeding $750 million.  

States across the country have implemented similar exemptions, with the hope that data centers will boost economies and revitalize rural areas by creating jobs and drawing in other businesses.  

In Virginia, a global data center hotspot, a legislative oversight committee ran an analysis in 2023 on the economic impacts of data centers. The review found that most economic benefits from data centers resulted from the construction phase, which typically lasted 12-18 months and employed about 1,500 workers.  

Megan Anderson, senior organizer with the Sierra Club’s Beyond Coal campaign in Indiana, said companies are in a rush to get data centers built. 

“You have developers shopping in each community to build these data centers wherever it's the cheapest and wherever they can get it done the fastest,” Anderson said. 

NIPSCO has plans to build a natural gas plant to serve data centers, with potential emissions of 7 million tons of carbon dioxide a year, the third highest in the state.  

Inskeep said utility companies are extending the lives of their coal plants to meet energy demand without having to pay for new infrastructure.  

In 2024, Duke Energy delayed the planned closure of its coal plant in Gibson County from 2035 to 2038, despite earlier plans to eliminate coal by 2035.  

Duke Energy Indiana spokesperson Angeline Protogere said in a statement that the company's power generation decisions weigh the increasing demand for power, energy costs for consumers and changing environmental regulations.  

Protogere stated Duke Energy also needs to prove to the Midcontinent Independent System Operator, which runs the electric grid in much of the Central United States, that they can meet energy costs year-round. That puts weather-dependent energy sources like solar at a disadvantage. 

“Our ultimate obligation is to provide power that is reliable and the lowest cost possible for customers while we modernize aging infrastructure with more efficient generation,” Protogere said in the statement.  

Noah Stubbs, a spokesperson with CenterPoint energy, stated that CenterPoint’s 2025 energy plan is still under development. 

“The Sierra Club’s report does not fully reflect the broad set of considerations utilities must weigh today, including rising resource costs, shifting federal incentives and evolving environmental regulations,” Stubbs said in a statement.  

As utilities try to meet Indiana’s increased demand for energy, Inskeep said legislators from the federal to the local level are pushing back against renewable energy. 

The One Big Beautiful Bill Act passed by the U.S. Congress in July eliminated many of the Inflation Reduction Act’s federal tax credits for renewable energy. 

On the state level, 72 of 92 counties in Indiana block renewable energy installations with moratoriums or bans, often driven by concerns about solar or wind power taking up farmland or decreasing home values. 

Monroe County restricts solar farms to certain zoning districts and includes certain requirements on properties like height, spacing, and fencing. Power lines must be buried underground unless specially permitted by the county. 

Accessory solar panels, which are used to power structures on their property, must follow minimum spacing requirements and may require a permit.  

Inskeep said while the Citizens Action Coalition supports local government “having a say” on renewable installations, local bans are setting Indiana back. 

“That's just not a feasible way of having an economy in the 21st century,” Inskeep said. “You can't ban all types of clean energy and have a thriving economic future.”